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"Telegraphed" Discount Rate Hike: Goldman's Take
BOTTOM LINE: The Federal Reserve Board has voted to increase the discount rate by 1/4 percentage point, to 3/4%, effective tomorrow. It has also decided to shorten the typical maximum maturity for primary credit under this facility to overnight, from 28 days, effective March 18, increased the minimum bid rate on the Term Auction Facility to 1/2% from 1/4%, and confirmed plans to phase this facility out. In its announcement, the Board has stressed that all of these are normalizations of its discount liquidity facility and not to be taken as a sign of impending tightening in monetary policy more generally.
MAIN POINTS:
1. Fed officials had telegraphed these moves in last week's testimony by Chairman Bernanke and in yesterday's release of the minutes to the January 26-27 FOMC meeting. As a result, they are not a surprise, though of course we had no specific sense of timing on the discount rate hike.
2. In the announcement the Fed repeats language that Chairman Bernanke used in his testimony to emphasize that these moves are technical in nature, saying that they "are not expected to lead to tighter financial conditions for households and busiinesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting..." In other words, they do not expect a significant effect on other short-term interest rates in the near term.
3. By increasing the discount rate, the Fed says it is encouraging banks to "rely on private funding markets for short-term credit..." In practice the effect is relatively small. As of yesterday, outstanding balances at the discount window and TAF were $14.1bn and $15.4bn, respectively.
- Jan Hatzius, Goldman Sachs
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though of course we had no specific sense of timing on the discount rate hike.
There are tens of thousands of comedians out of work, Jan. Please stop stealing their best lines.
*high five*
Op-ex: 2/19
Big T-Bond Sales: Wk 2/22.
The timing of this discount rate hike is purely coincidental, clearly. It just happened to serendipitously benefit USGovt interests and goals.
tee hee
"As a result, they are not a surprise, though of course we had no specific sense of timing on the discount rate hike."
If they were NOT a surprise, there would be no need to explicitly state that they had no sense of timing...so why explicitly state it?
DavidC
Too.......much.....big.......news.......today..........
................can't.......shovel.......myself......out....
..of.................the.............Fed/Gov............BS...
..........fast.......enough.
Black is white,
loose is tight,
and night is day,
all courtesy of
Fed GS Tsy...
Criminals already out of the bank:
"outstanding balances at the discount window and TAF were $14.1bn and $15.4bn, respectively."
What was the maximum draw down on this FREE money facility when it was getting maxed by the Banksters?
The price of Souvlakis is going up.
Look at SPY right before the announcement. 4:28 roundabouts.
I can hear that call:
Lloyd, Jamie, 'sBen. Just about to announce. Hit it.
This is an accurate assessment. Oh for crying out loud, give credit where it's due, even if one happens to dislike the source.
Thanks for posting this concise tidbit!
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